SECTION 2. BACKGROUND

.01 Section 305(a) of the Internal Revenue Code (“Code”)
provides that, except as otherwise provided in section 305, gross
income does not include the amount of any distribution of the stock
of a corporation made by such corporation to its shareholders with
respect to its stock.

.02 Section 305(b)(1) provides that section 305(a) shall not
apply to a distribution by a corporation of its stock, and the distribution
shall be treated as a distribution of property to which section 301
applies, if the distribution is, at the election of any of the shareholders
(whether exercised before or after the declaration thereof), payable
either in its stock or in property.

.03 Section 305(b)(2) provides that section 305(a) shall not
apply to a distribution by a corporation of its stock, and the distribution
shall be treated as a distribution of property to which section 301
applies, if the distribution (or a series of distributions of which
such distribution is one) has the result of the receipt of property
by some shareholders, and an increase in the proportionate interests
of other shareholders in the assets or earnings and profits of the
corporation.

.04 Section 1.305-2(a) of the Income Tax Regulations provides
that under section 305(b)(1), if any shareholder has the right to
an election or option with respect to whether a distribution shall
be made either in money or any other property, or in stock or rights
to acquire stock of the distributing corporation, then, with respect
to all shareholders, the distribution of stock or rights to acquire
stock is treated as a distribution of property to which section 301
applies regardless of—

(1) Whether the distribution is actually made in whole or in
part in stock or in stock rights;

(2) Whether the election or option is exercised or exercisable
before or after the declaration of the distribution;

(3) Whether the declaration of the distribution provides that
the distribution will be made in one medium unless the shareholder
specifically requests payment in the other;

(4) Whether the election governing the nature of the distribution
is provided in the declaration of the distribution or in the corporate
charter or arises from the circumstances of the distribution; or

(5) Whether all or part of the shareholders have the election.

.05 Section 1.305-1(b)(2) provides that where a corporation
which regularly distributes its earnings and profits, such as a regulated
investment company, declares a dividend pursuant to which the shareholders
may elect to receive either money or stock of the distributing corporation
of equivalent value, the amount of the distribution of the stock received
by any shareholder electing to receive stock will be considered to
equal the amount of the money which could have been received instead.

SECTION 3. SCOPE AND APPLICATION

The Internal Revenue Service will treat a distribution of stock
by a corporation that qualifies as a RIC or as a REIT under part I
or II, respectively, of subchapter M of the Code as a distribution
of property to which section 301 applies by reason of section 305(b),
and the amount of such distribution of stock will be considered to
equal the amount of the money which could have been received instead,
if —

(1) The distribution is made by the corporation to its shareholders
with respect to its stock;

(2) Stock of the corporation is publicly traded on an established
securities market in the United States;

(3) The distribution is declared with respect to a taxable year
ending on or before December 31, 2009;

(4) Pursuant to such declaration each shareholder may elect
to receive the shareholder’s entire entitlement under the declaration
in either money or stock of the distributing corporation of equivalent
value subject to a limitation on the amount of money to be distributed
in the aggregate to all shareholders (the “Cash Limitation”),
provided that—

(a) such Cash Limitation is not less than 10% of the aggregate
declared distribution, and

(b) if too many shareholders elect to receive money, each shareholder
electing to receive money will receive a pro rata amount of money corresponding to the shareholder’s respective
entitlement under the declaration, but in no event will any shareholder
electing to receive money receive less than 10% of the shareholder’s
entire entitlement under the declaration in money;

(5) The calculation of the number of shares to be received by
any shareholder will be determined, as close as practicable to the
payment date, based upon a formula utilizing market prices that is
designed to equate in value the number of shares to be received with
the amount of money that could be received instead. For purposes
of applying subsection (4) of this Section 3, the value of the shares
to be distributed shall be determined by using the formula described
in the preceding sentence; and

(6) With respect to any shareholder participating in a dividend
reinvestment plan (“DRIP”), the DRIP applies only to the
extent that, in the absence of the DRIP, the shareholder would have
received the distribution in money under subsection (4) of this Section
3.

SECTION 4. EFFECT ON OTHER DOCUMENTS

Rev. Proc. 2008-68 is amplified and superseded.

SECTION 5. EFFECTIVE DATE

This revenue procedure is effective with respect to distributions
declared on or after January 1, 2008.

SECTION 6. DRAFTING INFORMATION

The principal author of this revenue procedure is T. Ian Russell
of the Office of Associate Chief Counsel (Corporate). For further
information regarding this revenue procedure, contact T. Ian Russell
at (202) 622-7550 (not a toll-free call).